The Tribune

By NATARIO McKENZIE

Tribune Business 
Reporter

nmckenzie@tribunemedia.net

MINISTER of State for Finance Michael Halkitis said yesterday that the government initiated Value Added Tax (VAT) report was consistent with other reports in identifying VAT as second only to real property tax for supporting economic growth.

Speaking at a press briefing yesterday, Mr Halkitis acknowledged that the government had received a draft report from its US contracted economists, although he noted that the final report was being reserved until the Tax Coalition has submitted its complete report. Speaking briefly to the government initiated report, Mr Halkitis said: “What is said was what the vast majority of all others studies done have said: that when you rank taxes, the VAT ranks second only to property taxes. Things such as payroll taxes and corporate income tax rank further down. That is what they have advised us which reiterates the report of the IDB and numerous other reports we have received. They will make some suggestions relative to rate.

“The options you have are sales tax, a VAT, corporate income tax, personal income tax. When you look at the effect on the eocnomy and economic growth out of those options, a VAT is the best option for us. It’s left to us now to settle on what the rate is, the timing and to make sure that people are ready for it and that speaks to public education which you will see accelerated,” said he added.

He further noted: “What they also reiterated was as much as we might not like it to be the case, we live in a global environment where conditions here are influenced by what other people think of us, how they view our finances and our economy. As a government we have to be seen as making choices to improve our finances and make it more sustainable going forward.”

Mr Halkitis also acknowledged the report made by the New Zealand tax experts which outlined a one rate no exemptions framework.

Mr Halkitis also acknowledged that the government has been in discussions on how to address its unfunded civil service pension liabilities, acknowledging that the issue has gone largely unaddressed for years.

“We had a meeting with stakeholders where we met to discuss the government’s liability in terms of public sector pensions and how that has grown over the years,” he said. “Largely it is a non-contributory system. We have a huge liability and we need to determine how do we begin to address that issue so that we are able to preserve the benefits that people have already earned and make the system sustainable for people in the system now. We need to see how we can get the all stakeholders together to make the necessary adjustments to address an issue that has largely gone undressed for years.”